What’s going on?
2021 is on track to be a record-breaking year for mergers and acquisitions (M&A), after companies took advantage of their hot vax summer to really let loose.
What does this mean?
Firms have struck $4 trillion worth of deals since the start of 2021 – more than twice as many as they had done this time last year (tweet this). That’s partly because historically low interest rates have made it cheaper than ever for them to borrow money, which means they can finally splurge on a buyout they’ve long had their eye on. And it’s partly because they’re enjoying record-high stock prices, meaning they don’t need to issue as many new shares – or spend as much cash – to buy what they want.
Why should I care?
For markets: Tech’s still leading the way.
The dealmaking boom has spanned every sector, with plenty of companies citing double or triple-digit percentage increases in the number of deals they’re striking versus last year. But it’s tech firms – which, not coincidentally, have seen the most significant uplift in their share prices in the last year – that have been involved in around 21% of all M&A activity this year. And analysts don’t think that’ll stop: tech firms are expected to keep leading the way over the next 12 months, as they continue to play a pivotal part in our working-from-home world.
The bigger picture: The real winners.
Investment banks take a cut of every deal they make happen, so it follows that banking giants JPMorgan and Goldman Sachs both reported strong revenue from their dealmaking businesses. A lot of that came from the Middle East, where governments have been looking for new ways to diversify their economies after the oil market’s slump last year. And it’s not just JPMorgan and Goldman: investment banks the world over have been so busy that they’re reportedly scrambling for new hires.